October Jobs Report a Mixed Bag

by Rea Hederman

This morning’s jobs report is confusing because the two different surveys are saying two different things. The payroll survey shows an increase of 151,000 workers and revises upwards by 100,000 the number of jobs created in the last two months. However, the household survey, which determines the unemployment rate, shows a decline in jobs and the number of workers in the labor force. Diverging reports like this are not uncommon during changes in the business cycle.

If you’re a glass-half-full person, the payroll survey is welcome news. The private sector increased hiring by 159,000 jobs and government hiring fell by 8,000, almost all at the local level. The federal government increased hiring if the 5,000 temporary census jobs are excluded. Most of the private sector hiring was in the service sector as temporary hiring continued to increase as well in the health-care industry. While manufacturing fell slightly, the construction industry added jobs for the second time in three months. Hours and pay both ticked up in October.

Overall, the payroll survey shows the steady growth that we need for a real recovery. It paints a much better picture of the labor market than the reports during “recovery summer.”

Glass-half-empty folks will look at the household survey and be concerned. The unemployment rate stayed flat at 9.6 percent only because of a sharp drop in the labor force participation rate to 64.5 percent, the  lowest since 1984. Most of the workers who exited were adult males, while teenagers were the only group that increased their presence in the workforce. Adult males reached the lowest labor force participation rate of the modern, post-World War II era.

The unemployment rate for adult women and teenagers increased, but this was offset by a slight decline in the adult male unemployment rate. This drop in the rate was not due to found jobs, but rather to the fact that so many men are no longer in the labor market.

So October has a trick and a treat from the two different labor reports. The household survey is the more volatile of the two, which gives a bit more weight to the optimistic story from the payroll survey. The labor market may no longer be in its summer stall, but it is still growing far too slowly to help many Americans. Congress’s failure so far to prevent the impending tax hikes is one of the many reasons the recovery is sluggish. Hopefully, that factor will change for the better soon.

Rea Hederman is assistant director of the Center for Data Analysis and senior policy analyst at the Heritage Foundation.

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